AGL suspends coal seam gas wells application

Paddy Manning, Sean Nicholls and Ben Cubby

'Northern expansion' of AGL's Camden Gas Project could have resulted in fracking beneath thousands of homes in the Camden and Campbelltown council areas. Photo: Edwina Pickles

AGL Energy has put its application to develop 66 coal seam gas wells in western Sydney on hold, after encountering strong community opposition and hostility from the federal Government.

AGL announced this morning it had asked the New South Wales Department of Planning & Infrastructure to suspend its assessment of the proposed 'northern expansion' of its Camden Gas Project

AGL's group general manager of Upstream Gas, Mike Moraza, said in a statement to the ASX: “AGL understands that there are some members of the community who are concerned about the current proposal and we believe that this suspension will allow us to consider those community concerns.”

The 'northern expansion' could have resulted in drilling beneath thousands of homes in the Camden and Campbelltown council areas and was opposed by many local politicians including some Coalition MPs.

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This week the federal Environment Minister Tony Burke picked a row with the NSW Government saying it was "not serious" about regulating CSG, citing concerns about the development in western Sydney, including the possiblity of subsidence caused by directional drilling and potential fracking.

AGL would not say how long it had been discussing a postponement of drilling with the NSW government.

"We informed them of the decision this morning,’’ said an AGL spokeswoman, Karen Winsbury. ‘‘All I can say is that discussions have been ongoing.’’

"The primary reason we have made this decision is the community concerns. It’s fair to say that ‘community’ also encompasses members of parliament and councils. It is all of those concerns that we feel we need to address.’’

Ms Winsbury said Mr Burke’s comments about the project this week had no played any role in the company’s decision to halt the push towards drilling.

‘‘What we are going to do now is actually take the time to look at all these concerns,’’ Ms Winsbury said.

‘‘I think it will come as no surprise that the issues around hydraulic fracturing have emerged as a concern in the community. It would be fair to say that, broadly, concerns about water and the environment and drilling have been raised. All those things would be the primary concerns.’’

Ms Winsbury said there was no timeline for the suspension of the drilling plan, and no formal procedure established yet for addressing the ‘‘community concerns’’ it said it was responding to.

"Though a commercial decision of the company, the NSW Government commends AGL on its commitment to community engagement and ensuring that the concerns of the local community are addressed," he said.

AGL also asked that a public hearing by the NSW Planning and Assessment Commission, currently scheduled for 25 February 2013, be postponed. AGL said its existing operations at Camden have been producing coal seam gas since 2001, and provide approximately five per cent of the state's natural gas needs.

Jacqui Kirkby, from the Scenic Hills Association opposing the project, said AGL had previously withdrawn an application - for the Leafs Gully power station, ahead of the 2007 state election - when it knew it was not going to get an approval. After the election, then NSW planning minister Kristina Keneally approved the project.

"People are saying this is good news," Ms Kirkby said. "It isn’t. AGL’s got form on this."

Now AGL was seeking to withdraw its application - on the closing day for public submissions - rather than have the NSW Planning Assessment Commission knock it back.

"It’s interfering with people putting in submissions on the final day. Many people who would’ve put in a submission, won’t do it now.

"A suspension isn’t anything. It means we’ll be going through this process a third time.

"They know they’re going to lose. They haven’t made their argument. NSW Health has put in a submission absolutely slamming them for not doing a health assessment and not having consulted them.

"The PAC will do their job and knock this on the head, and then it’ll be over. That’s what we want.

"We want the exploration licence for Western Sydney cancelled - we want that for the whole state, by the way - and the government should come in and say they can never do CSG here."

The Greens MP, Jeremy Buckingham, dismissed the announcement as a "cynical PR stunt by a company desperate to get their contentious project out of the spotlight of a federal election campaign in the marginal electorates of western Sydney".

Mr Buckingham said the NSW government should ban all coal seam gas activity in sensitive areas.

"If [Premier] Barry O’Farrell was serious about protecting western Sydney, like the Greens, he would move to ban coal seam gas in suburbs, water catchments and our farmlands," Mr Buckingham said.

UBS utilities analyst David Leitch said the 'northern expansion' suspension was a "strategic pause" for AGL and he did not think the company would abandon or write off the project.

But he said Camden gas was not as material to AGL as its Gloucester gas project, which could supply up to 30 per cent of the NSW market, and which is awaiting approval from Mr Burke. AGL's proven and probable gas reserves at Gloucester stood at 669 petajoules last year, five times the reserves at Camden of 142 petajoules.

"At the end of the day [the northern expansion at Camden] is pretty irrelevant to AGL," Mr Leitch said. "Gloucester is much more important."

Mr Leitch said AGL, whose shares fell marginally this morning, was "treading slowly" in western Sydney. He described the risks from CSG extraction as trivial.

"Apparently the locals in the Camden area are up in arms about fracking," he said. "I have personally seen people, at a lunch, drink the fracking fluid. I’ve seen the CEO of Halliburton drink it."

Mr Leitch said roughly a million gas wells had been fracked in the US, including in urban areas over the Marcellus Shale play in Pennsylvania - although the shale wells were generally deeper than the coal seam gas wells AGL is targeting in Western Sydney.